The Electricity Market Reform

What businesses need to know

What is the Electricity Market Reform?

The Electricity Market Reform (EMR) is the Department of Energy and Climate Change’s statutory consultation on the government’s preferred electricity market framework.

The Government sees nuclear, renewables and carbon capture and storage (CCS) as essential elements of the UK low carbon electricity mix needed to achieve its energy and climate policy goals. It recognises that to deliver this new low carbon generation with stable, predictable and transparent returns, a redesign of the market mechanism is required. As a result the EMR was launched in December 2010.

The EMR is specifically targeted at addressing investor criteria, to make the UK an attractive place for energy investments.

The consultation closed on 10 March 2011, with primary legislation to follow in 2011 and secondary legislation expected in 2013/14. More information on the EMR Consultation.

npower has worked with other RWE companies in the UK to develop a full response to the consultation. RWE UK's consultation response is available here.

What are the key elements of the EMR?

The Energy Market Reform sets out four key proposals:

1. A carbon price floor – a tax on fossil fuels supplied to all electricity generators, including CHP stations, to be introduced from April 2013.
2. Feed-in-tariffs – to provide greater revenue certainty for low-carbon generation, either in the form of a two-way contract for difference (the government’s lead option) or a premium FiT (the preferred alternative).
3. Targeted capacity payment – an incentive to encourage the construction of reserve plants or demand reduction measures to ensure there’s an adequate capacity safety cushion as the amount of intermittent (e.g. wind power) and inflexible low-carbon generation increases.
4. An emissions performance standard – a limit on the amount of carbon any new generating plant can emit, particularly coalfired power stations (so encouraging the inclusion of carbon capture and storage, for example).

How has npower contributed to the consultation?

Part of the Industry Response

Dr John McElroy, director of policy & public affairs at RWE npower, gave verbal evidence to the Energy and Climate Change Select Committee on Wednesday 2nd February 2011.

Giving businesses a voice

At npower we feel that it’s vital that UK businesses are given a voice in the Department of Energy and Climate Change’s consultation on the proposed UK Electricity Market Reform. To facilitate this we:

• Hosted a roundtable event for businesses where they were able to discuss their views and concerns on the future of the electricity market. The event, on Monday 14th February, brought together npower’s energy and policy experts with Jeremy Nicholson, director of the Energy Intensive Users Group, to discuss the EMR with energy managers from a variety of sectors and leading energy consultants.
• We also conducted quantitative research with 62 of our industrial and commercial customers to further investigate the views of major energy users on the proposals outlined in the EMR.

We collated the results of these activities and developed a comprehensive report that captures businesses’ views on the EMR. We submitted this report to the Department of Energy and Climate Change on Friday 4th March for consideration as part of the consultation.

View the EMR Report

Here is a ten-minute video of highlights from the roundtable event: